We know you can exclude pre-participation compensation from the safe harbor contribution.  What about post-participation compensation where the employee moves in the same plan year to a position that is not an eligible employee?

For example, an employee is hired in a non-union position, enters the plan in 2018, and then later in 2018 moves to a union position that is not eligible for the safe harbor.  Can the compensation paid to the employee after the employee moves to the union position be excluded? 

To phrase the more question more precisely (since everyone is going to ask what the plan says), can the plan provide for such an exclusion (assume all the notice requirements and other requirements of safe harbor are met).  I read the regs to say the comp. can be excluded, but I have just never seen this before.  

Not sure if this is the correct forum for this question, but...

Owner only 401(k), assets under $250k, has not filed 5500s.

Owner in the process of divorce, anticipating a QDRO.

If the plan doc allows the ex-spouse to establish an account in the plan and leave the funds in the plan, would I be correct that the plan is no longer a solo 401k and would require a 5500?

What if the ex-spouse does distribute the funds, but it takes 30 or 60 days to do so.  Does that period of time require that a 5500 be filed?

Thanks.

Do we all agree that based on IRS Notice 2016-16, I can amend the Plan to exclude certain items of compensation?

I will send out an SMM at least 30 days in advance, but because the definition of comp is not required safe harbor notice content I probably don't even need to do that.

Agreed?

I have an ERISA 403(b) plan client who has asked for help filing Form 8955-SSA, and they are subject to the electronic filing requirement for this return (must submit via the FIRE system). 

I know how to prepare this form but it is not one of my normal services through my consulting business so I do not have the software to create a properly formatted file that I could then submit via FIRE.  I can't seem to find any software to create the file that isn't part of a large (costly) subscription or package.

Is it possible to create a file without such software?  I found the parameters provided on the IRS website, and it seems difficult.

Calendar year client.  Let's say profit sharing contribution for 2017 is $190,000 which they will deposit to the Plan in 2018.  Similar deposit to be made for the 2018 plan year.

Issue is that while they want to make the actual deposit of $190,000 for 2017, they do NOT want to deduct on the 2017 corporate tax return, but rather deduct the 2017 and 2018 on the 2018 return.  They did put the 2017 corporate return on extension, so the thinking of they made it within the ordinary time but filed the return before depositing doesn't work.  What are the issues here (would combined 2017 and 2018 amounts be subject to the 2018 404 25% limit solely on 2018 compensation for example).

Ownership is attributed between parents and adult children if the ownership % of one is greater than 50%.

https://www.irs.gov/pub/irs-tege/epchd704.pdf page 12

So Dad owns 100% of a business with 50 employees.  He starts a 50/50 partnership with his son and takes some clients there and is smart enough to keep the entities very separate in the clients they serve, maybe even a different line of business.

Assuming the comp is there to support it, Dad has big qualified plan contributions in the side business and since it's less than 80% common ownership, it's not a controlled group and he doesn't have to cover his 50 employees.  This seems like a scenario ripe for abuse.  Where's the catch?

https://www.businessofbenefits.com/2018/03/articles/403b/a-403b-psuedomorph-the-irss-gradual-shift-on-applying-415-limits-to-403b-plans/

SpiritRider...you've chimed in on this issue time after time and have been very helpful with respect to this issue of aggregating 403(b) contributions with non-affiliated group retirement plans. Do the details in the above article change the rules somewhat, such that there is no longer concern about having to aggregate the total employee + employer limit for a 403(b) participant.

In prior discussions, you have stated that I am considered an "owner" of my hospital-based 403(b) plan and, as such, would be limited with respect to solo-401k contributions I could make from my side income to a total of $55,000, due to aggregation rules. Does this no longer hold true?

Anyone else have an opinion.

Thanks, in advance, to the very smart and informative folks on this board (especially you, SpiritRider!)

Scarabrad

What is the rule on employees enrolling in 401k?  For example, a plan has a July 1st entry date and the payroll is July 1st.  Can an employee hand in an enrollment for on July 5th for the next payroll?  Or is it a hard cut off date of July 1st if that is that they are eligible and then they have to wait until next entry date.

Thanks.

I have inherited a plan which has been historically told they do not need a bond since all the participants (four in total) are Trustees.   I do not see an exclusion from the bonding requirement for this situation.   Only three of the Trustees are owners and the plan files full 5500 due to non-qualifying assets.    

The bonds I have seen do not cover Trustee benefits in the event of a loss so is this the roundabout logic?  Since none of them are protected by a bond, they do not need the bond?

If the plan were 100% qualifying assets, I would not be concerned.   However,  it is 70% non-qualifying assets.  If they are not exempt from bonding, they will have to get an auditors opinion if caught. Thoughts?  

I assume the empower imports used with Relius are similar to other software.

there are a numbers of files I found to be real useful with FT William govt forms. all can be copied and pasted into excel and worked with.

There is an AHIP file - this contains the schedule of assets data.

the following files all have import files into FT William

There is a PSD file. this is schedule D data.

There is a PSA file. this is the schedule A info. this is in a fixed file format, so have to work a little bit with is in excel to get the data into a format for importing.

PC2 is page 2 of sched C

PC3 is page 3 of sched C

Happen to have a MEP of 35 plan or so, and having the ability to copy these files into excel, summing up the totals and then with a small amount of work pasting that data into FT William import file sure saves a lot of time.

(Along with being able to pull the SSA info from Relius and importing that (this year almost 200 folks for the SSA) really helps.

Hello,

I plan fails ADP test, instead of doing refunds they decided to make a QNEC.  My question is when calculating the QNEC can I also re-characterize some of the HCE's contribution as catch up.  For example if one HCE,over 50, has $5000 in contributions can I re-characterize this as catch up too bring the HCE avg ADP down and use that # to calculate the QNEC, or do I have to use the HCE ADP avg with all contributions under $18k

Thanks,

A new client has terminated and distributed the assets in a previous 401k plan. Does the 12 month rule begin once the assets have been distributed or once the final 5500 is filed?

This is a little complicated, so I will spoon out the facts one by one.

I have a DC plan with a 401(k), 3% safe harbor QNEC, and new comparability PS - one participant per group.   The plan year is the calendar year.  The plan is top-heavy.  The 3% safe harbor excludes pre-participation comp.

Eligibility for 401(k) is one year (1000 hours) with semi-annual entry dates (Jan. and Jul.)

Eligibility for profit sharing is 2 years (1000 hour each year).  Also semi-annual entry dates.

I am testing for 2017.  One NHCE (let's call her Employee A) entered the 401(k) on 01/01/2017.  Employee A did not have 2 years in 2017 and thus is not eligible for the PS. 

Another NHCE (Employee B) entered the 401(k) on 07/01/17.  Employee B also did not have 2 years in 2017 and thus is not eligible for the PS.

My understanding is Employee A is required to get the gateway, with the 3% SH QNEC counting towards that.

Employee B only gets a safe harbor of 3% of comp. from 7/1 to 12/31, so he also has to get a top heavy for the whole year (his safe harbor on his half-year of comp. counts towards the top-heavy).  The 3% safe harbor plus the top-heavy satisfy B's gateway requirement.

The question is whether I include either or both of Employee A and B in the numerator or denominator, or both, when doing the rate group testing.   In other words, when I test the rate groups, how do I treat Employee A and B?  Are they totally excluded because they are not eligible for the PS? 

I have a situation I'm hoping to get some suggestions on. I have a participant who received an erroneous large commission payment in 2017 which was repaid in 2018. 401k deferrals were taken from the erroneous payment, and the amount was such that it caused the participant to reach his 2017 402(g) limit, so no 401k deferrals were taken for the rest of the year. 

Reversing the deferral contribution results in him NOT exceeding the 402(g) limit. In correcting this situation, I assume the company has an obligation to make up what his 401k contributions would have been for the rest of the year? Do you agree that this will be at least at a 50% rate plus match and earnings? Of course he is an HCE - fortunately it shouldn't change the testing results appreciably.

I’m hoping BenefitsLink people will help me crowdsource some background for a research project.

The research project assumes that, whether on May 7 or by some later date, a court issues a mandate to vacate the 2016 investment-advice fiduciary rule.  The first of the questions is:  which plan-sponsor fiduciaries are affected by that result?

If one follows the rulemaking’s 2015-2016 reasoning, it is small plans that more need to be protected from communications by those who, but for applying the to-be-vacated 2016 rule, might not be held to fiduciary standards of loyalty and care.

But how small is small?

In recent years, I’ve seen plans smaller than the Labor department’s $50 million dividing line use registered investment advisers who sign contracts expressly accepting status and responsibility as an ERISA fiduciary.

In your experience, what size sorts plans between those unlikely to use a fiduciary adviser and those likely to use a fiduciary adviser?

Here's a sad tale for today...

A participant died last week, and the plan administrator called to review her beneficiary form with me - it lists her two sons as the co-beneficiaries.  "Oh," he said, "was her husband supposed to sign off on this somewhere?"

Uh-oh.

I explained how, without that signature (notarized), her balance goes to her husband (who is husband #2, not the father of the children - not clear if he was married to her when she was hired or not, or when we suggested they update the beneficiaries with each restatement... not that that matters at this point).  Now there are quite a few unhappy people.  I've got basic plan document language that explains how a beneficiary is determined, of course, but one of the lawyers wants proof "under law", whatever that means.

I thought that this would be defined in ERISA somewhere, but I don't see it.  The best I can find is 29 USC S.1002 (8) in "Definitions": 
 

Quote

(8) The term “beneficiary” means a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.
...

<<the hyperlinked "beneficiary" links back to it's own definition>> - AC

But that's not very helpful.  Any suggestions?  I don't want to rack up [too much] more billable time to my client because of a bunch of pushy lawyers... Thanks.

Client has failed their ADP test. Test was completed and client and participants were notified right on 3/15/17. Refunds were also requested on 3/16/17. Will they still be subject to the 20% penalty since this all happened on 3/15?

We are taking over 5 companies each with their own plan and are a control group.  Companies A, B and C are SH with a SH enhanced match of 100% up to 6%; Company D has a stated match of 100% up to 4% and Company E does not have a match; all plans have the same year end.  I think I understand testing for the 410b and the 410b fails for Companies D & E.  

• Company A (SH) can be run separately if they pass 410b includes other SH plans B/C and D/E as not benefitting .
• Company B (SH) can be run separately if they pass 410b includes other SH plans A/C and D/E as  not benefitting.
• Company C (SH) can be run separately if they pass 410b includes other SH plans A/B and /D/E as not benefitting.
• Company D (stated match) can be run separately if they pass 410b includes E (I think this can be done) and A/B/C as not benefitting.
• Company E (no match) can be run separately if they pass 410b includes D (I think this can be done) and A/B/C as not benefitting.

 I haven't tested using the ABT YET, but I'm doubtful, so if it does fail the ABT test; how does the ADP-ACP test work in this case?  I would assume that Companies D and E are tested as one(???) for ADP-ACP purposes?  Or are they tested separately?  Companies A,B and C are SH so they would not be included.  Very confused at this point and wondering why we want to take this nightmare over.  Oh, and no they have not been tested as a Control Group in the past so this is something else we will have to fix.  

If I am incorrect in any of my thinking please set me straight and I appreciate any comments / help. 

Thanks in advance!   

Participant over 59 1/2 requested an allowable in-service of 100% of his vested account balance.   He began contributing roth in January of this year.  How is the 1099-R coded for the roth portion 1B or 2B?  These are the Code options provided by the vendor's online system.  I'm thinking that because the roth contributions were not in the Plan for 5 years he will have to pay tax on the roth earnings and it should be the 1B Code.  Because he is over 59 1/2 - that gets him the waiver for the 10% premature withdrawal penalty on the earnings so perhaps the 2B Code?  I know I'm overthinking this but am burned out!!

Our document uses W-2 income. Working within a payroll company, we get to see all the bits and pieces of compensation. Should shareholders health insurance(SHI) and auto reimbursement be included in the W-2 income for compensation purposes?